How expensive is housing in the US?

An examination of the cost of housing in the US over time.

WarningWork in Progress

I am actively updating this post. Content will change as I work my way through this article.

tl;dr

Things are bad, but not as bad as you might think.

At a national scale,

• From January 1953 to January 2026¹, the price-to-income ratio of a home has increased by 2.85 percentage points (pp) per year on average. As of January 2026, the ratio stands at 4.51², placing it in the 73rd percentile of all observations in this period.
• From April 1971 to January 2026, the mortgage debt-to-income ratio has decreased by -0.14 pp per year on average. As of January 2026, the ratio stands at 0.26³, placing it in the 46th percentile of all observations in this period.

¹ Some of the most recent data used to compute these metrics come from forecasts. See Table 1 for details on the range of the underlying data.

² Meaning the typical house costs the typical household 4.51 \(\times\) their gross annual income

³ Meaning the typical household would spend 0.26 \(\times\) their monthly income on the typical mortgage. This calculation assumes only interest and principal.

intro

Much has been written recently on housing affordability, with much of it being negative.⁴ Aside from the tendency of news organizations to produce negative content, I think what is lost in these reports is historical context: where were we, and where are we now? Even when the historical context is present, metrics may be used that, if not interpreted carefully, can be misleading. For instance, longtermtrends.com gives a chart that shows the ratio of the S&P/Case-Shiller Home Price Index to the median household income. This index is used a lot since it’s high-quality and has data that dates back to 1890. However, the problem here is that the Case-Shiller index is a weighted average. The distribution of home values tend to be right skewed, so an average will be greater than the median (the typical house). So, dividing the average by the median produces a price-to-income ratio that is a bit more pessimistic. The typical person is buying the typical house, not the average house.

⁴ Here’s a few: CBS, NBC, and FOX.

In order to provide some clarity on the question of housing affordability, I’m going to look at four metrics in particular:

1. The ratio of the typical cost of a house to the typical household income. In this article, I’ll refer to it as the price-to-income ratio.
2. The proportion of a person’s monthly income that would be dedicated to their monthly mortgage. For my analysis, this will be limited to only interest and principal⁵, and will assume a 20% downpayment, so a loan on 80% the value of a house. I’ll refer to it as the debt-to-income ratio in the article.
3. The real⁶ median home price over time.
4. The real median household income over time.

⁵ I’m interested in having a better picture of this by incorporating property taxes and home insurance costs if someone could get me the data…

⁶ 2026 dollars

1. and (2) are the most important metrics and incorporate (3) and (4). However, (3) and (4) can help provide some context to better understand (1) and (2).

analysis

I’m planning to examine this at three different geographic scales:

• national
• state
• county

national scale

the data

The data I’m using is mostly from the FRED. I’ve supplemented some of these series with data extending further back to get a more complete picture. Below are the data series and where I got the supplemental data:

• CPIAUCSL: Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• MEHOINUSA646N: Median Household Income in the United States
  • Years 1947-1965 are from p.877 of a US Census Bureau publication.
  • Years 1967-1983 are also from the US Census Bureau
• MORTGAGE30US: 30-Year Fixed Rate Mortgage Average⁷ in the United States
• MSPUS: Median Sales Price of Houses Sold for the United States
  • Years 1953-1962 are from few different indices⁸ that have been combined. The author explains the process here.

⁷ Unfortunately, there is no high-frequency median equivalent to this data that I know of. Fortunately, there are some restrictive filters (e.g. 20% down, excellent credit, excluding jumbo loans) on which data to use that removes large outliers making the mean more centered. See here for more details

⁸ The NAR Median Sales Price of Existing Homes, Shiller’s NSA Home Sale Index, and the FHFA’s NSA Existing Home Sale Index

Let’s take a look at the data below:

Figure 1: National housing and economic indicators over time. Dollars are in nominal terms. Hover over the lines to see specific values.

There are a few things that need to be handled before analysis:

1. The data is captured at different frequencies.
2. Not all the data is recent.⁹

⁹ The 30-year fixed mortgage rate is the most egregious offender. The reason for this, is that Freddie Mac began surveying lenders on mortgage rates in April 1971, making this the earliest date for which consistent, nationwide data is available.

Table 1: Latest data points retrieved for each national economic series.

series	collection frequency	oldest observation	newest observation
30-year fixed mortgage rate	weekly	April 2, 1971	January 15, 2026
consumer price index	monthly	January 1, 1947	December 1, 2025
median home price	quarterly	January 15, 1953	April 1, 2025
median household income	annually	January 1, 1947	January 1, 2024

To account for (1), I put everything in a monthly frequency. Cubic splines were used for quarterly and annual data, while weekly data was averaged. For (2), I first smoothed each series using LOESS then modeled each series using ARIMA to produce estimates for the most recent date available (January 2026). These estimates should be taken with a grain of salt, though I include \(3 \sigma\) prediction intervals to capture the uncertainty.

Figure 2: Harmonized and smoothed economic indicators over time. Green line shows the smoothed series. Gray line shows the raw series. Dollars are in nominal terms. Hover over the lines to see specific values.

These smoothed indicators are used to calculate the metrics in the following sections.

the metrics

real median home price

Let’s put the nominal median home price in 2026 dollars. I’ll include a linear model to help us understand the trend over time.

Figure 3: Real median home prices (2026 dollars) over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From January 1953 to January 2026, the real median home price has increased by $3,462 per year on average. This translates to roughly 1.57 pp per year. As of January 2026, the real median home price stands at $417,986, placing it in the 90th percentile of all observations in this period.

What complicates this analysis is that the typical house from 1950 looks much different than the typical house from today. Across the decades, houses look pretty different, whether that be square footage or amenities. Nano Banana¹⁰ can give us a visual sense of these differences:

¹⁰ Nano Banana is an AI image generator from Google. I thought these images were pretty good, but if you want some real examples you could peruse the book House and Plans, 1950 and just look at new builds on Zillow.

Figure 4: Visual comparison of typical homes from the 1950’s (left) and 2020’s (right)

A few key figures on these differences:

Table 2: Comparison of housing features over time

feature	1950’s home	2020’s home
median size	under 1,000 sq ft	over 2,000 sq ft
complete plumbing	66%	99%
air conditioning	under 2%	over 90%

Andrew Latham did a great analysis on housing affordability where he found that the price per square foot of a house (ignoring amenities) from 1978-2023 grew by 20% which works out to roughly 0.44 pp per year which is about 0.28 the rate of house prices in general.

Of course the problem in all this, is you can’t buy a 1950’s house today¹¹; the option for a smaller house just isn’t available. Those aren’t the houses being built¹², so buyers are left with nicer, more expensive houses.

¹¹ Not that anyone would want to!

¹² The median square footage of new builds has been decreasing over the last decade. Hopefully this is a trend that will continue if there is an appetite for it.

Fortunately, we are coming out of a bubble which peaked in early 2022, so prices are cheaper today than a few years ago. However, unless housing policy/supply changes, we should expect housing to get more expensive.

real household income

Let’s put the nominal median household income in 2026 dollars. I’ll include a linear model to help us understand the trend over time.

Figure 5: real median household income (2026 dollars) over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From January 1947 to January 2026, the real median household income has increased by $398 per year on average. As of January 2026, the real median household income stands at $92,742, placing it in the 100th percentile of all observations in this period.

price-to-income ratio

We can use nominal dollars to calculate the price to income ratio. I’ll include a linear model to help us understand the trend over time.

Figure 6: Price-to-income ratio over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From January 1953 to January 2026, the price-to-income ratio of a home has increased by 2.85 percentage points (pp) per year on average. As of January 2026, the ratio stands at 4.51¹³, placing it in the 73rd percentile of all observations in this period.

¹³ Meaning the typical house costs the typical household 4.51 \(\times\) their gross annual income

debt-to-income ratio

Figure 7: Debt-to-income ratio over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From April 1971 to January 2026, the mortgage debt-to-income ratio has decreased by -0.14 pp per year on average. As of January 2026, the ratio stands at 0.26¹⁴, placing it in the 46th percentile of all observations in this period.

¹⁴ Meaning the typical household would spend 0.26 \(\times\) their monthly income on the typical mortgage. This calculation assumes only interest and principal.